Putting Relative Decline in Perspective

I found a lot to like in Roger Cohen’s latest column, but I did think his point that Barack Obama is “setting the tone for coming decades that — whatever else they bring — will see America’s relative economic power decline” could use a bit of perspective.

If what you mean by relative economic power is America’s share of global output, then it’s important to recognize that we’ve been in a state of decline ever since the mid-1940s. In 1946, almost every industrialized nation on earth lay in a state of rubble and the US was something like half of world output. We’ve been declining, in relative terms, ever since. The other thing that’s happened is that countries have split and recombined in different ways. The Soviet Union was a much larger country than Russia, dividing it up into pieces made us look relatively bigger. At the same time, Western European countries have started to agglomerate. If you think that alongside the US, Japan, and China the world’s other major economy is Germany then we look a lot bigger than Germany. But if you think that it should be the European Union, the US, Japan, and China then we’re quite a bit smaller than the EU. Or if you want to make it the Eurozone, rather than the EU as a whole, then we’re slightly smaller. But of course in terms of political power the EU doesn’t have the kind of decision-making mechanism that can transform the large scope of its economy into strategic influence.

That leaves you with Japan, relative to whom we’re getting stronger, and China. China is important, but it’s still basically a country full of impoverished people. And even when you lump them all together, the total is much, much smaller than ours. In other words, insofar as we’re losing relative economic power this is mainly a result of already-rich European countries becoming more coordinated in their activities. Where they’re very coordinated, they’re very powerful—their central bank probably matters more than ours at this point. But where they’re not coordinated, things are much as they’ve been for decades and the US is by far the world’s leading power.